WHEN voters chose Brexit in the June 2016 UK referendum, sterling and the stock market slumped. Two years later risks are ignored
Despite the dangers from a bitter civil war within the ruling Conservative government and growing possibility of a hard-left Labour Party successor, the perils are on the backburner.
The latest resignation of ministers from Prime Minister Theresa May’s shaky Conservative government, including the Foreign Secretary and Brexit Secretary, seems to have had minimal impact on both the UK and European markets. Perhaps the reasons are the UK’s best summer since 1976, with a young football team reaching the World Cup semi-finals; and Wimbledon, Ascot and the Henley Regatta in full swing. Perhaps the good mood and hot weather encouraged traders to believe that the UK Parliament and European Union negotiators will accept Mrs May’s proposed “soft” Brexit; that EU member governments will be happy that the UK will effectively remain in the Union, albeit with no voting rights.
But as summer turns to autumn, the political and market communities may recognise the deepening disenchantment of the populace. Poll after poll already show that voters are furious with the squabbling politicians and the performance of the prime minister. In the meantime, Brexit and Labour MPs have indicated that they will not vote for Mrs May’s Brexit proposals. The EU is also likely to reject immigration controls and other wishes. Traders could then perceive a political fallout that would likely deter foreign investment and hurt trade and financial services, leading to a rapid deterioration in market sentiment.
If there is indeed another sterling and stock market rout, it would stem from the decisions of two preceding premiers and blunders of the present incumbent. Besides the Iraq war, Tony Blair made another mistake: He did not take advantage of an EU ruling that allowed the UK, France, Germany and others to block Eastern European immigration for seven years after the countries became new members of the Union. Instead, Mr Blair’s Labour government opened the floodgates, causing deep resentment as queues for schools and surgeries lengthened. Failing to win immigration and other concessions from the EU, David Cameron – backed by Parliament – made the mistake of holding a simple majority referendum.
Mrs May took on the poisoned chalice. Then followed a series of blunders which have led to the present unstable political impasse. Mrs May decided on an ill-advised election that decimated her majority. In the manifesto and subsequent promises, she insisted that the UK would no longer be a member of the EU’s Single Market and Customs Union and would make its own laws.
Signs that Mrs May would renege on her promises came when she sidelined Brexit Secretary David Davis. She left negotiations with the EU to Oliver Robbins, a civil servant whom Brexiteers regard as a Europhile and appeaser. Mrs May also made no contingency plans to keep the border of Ireland and Northern Ireland open after Brexit. Negotiations with the EU dragged on with some agreements of massive UK payments. There have also been no plans in the event of a failed Brexit deal. The negotiation plan involves acceptance of current EU agricultural regulations. This is a bad error. The US is the UK’s biggest single nation trading partner and leading foreign investor and President Trump and US trade officials have warned that US agricultural imports must be accepted in an independent trade deal.
Sadly, Brexit and blunders have left the UK with a weakened premier and a government with broken promises and shrinking respect. Hope springs eternal that the EU will be flexible and a reasonable deal will be negotiated by the deadline.
© copyright Neil Behrmann
This editorial was first published in The Business Times, Singapore
Neil Behrmann is London correspondent of The Business Times. Jack of Diamonds his thriller on global diamond mining and smuggling, has recently been published. It is the sequel to the thriller, Trader Jack, The Story of Jack Miner.
See reviews of both books on: https://www.amazon.co.uk/Neil-Behrmann/e/B005HA9E3M